Yellow Pages Limited Reports Third Quarter 2019 Financial and Operating Results and Announces the Full Repayment of the Senior Secured Notes in the Fourth Quarter

MONTREAL, Nov. 13, 2019 /CNW Telbec/ - Yellow Pages Limited (TSX: Y) (the "Company"), a leading Canadian digital media and marketing company, released its operational and financial results today for the quarter and nine-month periods ended September 30, 2019 and announces that on December 2, 2019 the Company will make a mandatory redemption payment of $50.7 million, including accrued and unpaid interest of $0.4 million on its Senior Secured Notes (the "Notes"), at which date the Notes will be fully repaid.

"Fuelled by another quarter of strong Adjusted EBITDA less CAPEX margin, the cash we generated in the quarter will allow us to fully repay our Notes on December 2, 2019, three years ahead of maturity. Our net debt excluding lease obligations¹ at the end of the quarter stood at only $82.5 million. 

"And on the revenue front, for the third consecutive quarter we produced an improved year-on-year rate of revenue change in our YP segment, as our various initiatives to 'bend the revenue curve' continued to bear fruit" said David A. Eckert, President and CEO of Yellow Pages Limited.

Financial Highlights
(In thousands of Canadian dollars, except percentage information and per share information)
Yellow Pages Limited	For the three-month periods ended September 30,		For the nine-month periods ended September 30,
	2019	2018	2019	2018
YP revenues	$98,147	$117,647	$308,432	$374,820
Other revenues and Intersegment Eliminations	-	12,503	1,274	77,856
Total revenues	$98,147	$130,150	$309,706	$452,676
Adjusted EBITDA^1	$37,786	$46,261	$126,589	$151,416
Adjusted EBITDA margin^1	38.5%	35.5%	40.9%	33.4%
Net earnings	$13,839	$27,125	$41,072	$42,852
Basic earnings per share	$0.52	$1.03	$1.55	$1.62
Diluted earnings per share	$0.49	$0.89	$1.44	$1.49
CAPEX^1	$2,351	$2,185	$7,757	$7,996
Adjusted EBITDA less CAPEX^1	$35,435	$44,076	$118,832	$143,420
Adjusted EBITDA less CAPEX margin^1	36.1%	33.9%	38.4%	31.7%
Cash flow from operating activities	$50,559	$35,895	$112,734	$92,877

Third Quarter of 2019 Results

• Despite revenue pressures, the Adjusted EBITDA less CAPEX margin¹ increased to 36.1% as compared to 33.9% for the same period last year as a result of the divestiture of unprofitable or non-synergistic businesses and revenues as well as cost reductions in the YP segment. Adjusted EBITDA less CAPEX¹ decreased by $8.7 million year-over-year and amounted to $35.4 million.
• Net earnings decreased by $13.3 million to $13.8 million, or $0.49 per diluted share.
• On November 1, 2019, as previously announced, the Company made a $30.0 million optional redemption payment toward the principal amount of the Notes.
• The Company will also make a mandatory redemption payment of $50.7 million on its Notes, including accrued and unpaid interest of $0.4 million, on December 2, 2019. With this payment the Company will have repaid the Notes in full.
  

Segmented Information

The Company's operations are categorized into two reportable segments:

• The YP segment provides small and medium-sized businesses across Canada digital and traditional marketing solutions, including online and mobile priority placement on Yellow Pages' owned and operated media, content syndication, search engine solutions, website fulfillment, social media campaign management, digital display advertising, video production and print advertising. This segment also includes the 411.ca digital directory service helping users find and connect with people and local businesses.
• The Other segment includes YP Dine and Bookenda until their sale on April 30, 2019 and the Mediative division until its liquidation on January 31, 2019. The operations of the businesses sold in 2018 are also included in this segment until their respective disposal dates, namely: JUICE Mobile, RedFlagDeals.com™, Yellow Pages NextHome, ComFree/DuProprio, Totem and Western Media Group.

An overview of each segment and the performance of each segment for the three-month and nine-month periods ended September 30, 2019 can be found in the November 12, 2019 Management's Discussion and Analysis.

Financial Results for the Third Quarter of 2019

Total revenues for the three-month period ended September 30, 2019 decreased by $32.1 million or 24.6% year-over-year and amounted to $98.1 million as compared to $130.2 million for the same period last year. The decline in total revenues for the three-month period ended September 30, 2019 was due to lower digital and print revenues in the YP segment as well as the divestitures in the Other segment.

Revenues for the YP segment for the third quarter of 2019 decreased by $19.5 million or 16.6% year-over-year and amounted to $98.1 million compared to $117.6 million for the same period last year. The decrease for the quarter ended September 30, 2019 is mainly due to the decline of our higher margin YP digital media and print products and to a lesser extent to our lower margin digital services products, thereby creating pressure on our gross profit margins.

Adjusted EBITDA decreased by $8.5 million or 18.3% to $37.8 million during the third quarter of 2019, compared to $46.3 million during the same period last year. The Company's Adjusted EBITDA margin for the third quarter of 2019 was 38.5% compared to 35.5% for the third quarter of 2018. The decrease in Adjusted EBITDA was the result of the revenue pressures in the YP segment as well as the divestitures in the Other segment.

Adjusted EBITDA for the YP segment for the third quarter of 2019 totalled $37.8 million compared to $46.0 million for the same period last year as a result of lower overall revenues, pressures from the change in product mix and investments in customer care. The Adjusted EBITDA margin for the YP segment for the third quarter of 2019 was 38.5% compared to 39.1% for the same period last year. The slight decrease in Adjusted EBITDA margin for the third quarter is due to the revenue pressures and investments in customer care being mostly offset by an increased focus on the profitability of our products and services and reductions in both our cost of sales and other operating costs.

Adjusted EBITDA less CAPEX decreased by $8.7 million or 19.6% to $35.4 million during the third quarter of 2019, compared to $44.1 million during the same period last year mainly due to lower Adjusted EBITDA partially offset by decreased spending on software development. Adjusted EBITDA less CAPEX was further negatively impacted by lease incentives received in 2018.

The Company recorded net earnings of $13.8 million during the third quarter of 2019 as compared to $27.1 million during the third quarter of 2018. The decrease in net earnings in the third quarter of 2019 compared to the same period last year is mainly due to the net earnings for the three-month period ended September 30, 2018 benefiting from a $7.5 million gain on the sale of the assets related to the operations of RedFlagDeals and a reversal of income tax provisions of $18.3 million recorded with respect to previous taxation years. Furthermore, net earnings were impacted by lower Adjusted EBITDA which was more than offset by lower depreciation and amortization expenses mainly from lower software development expenditures and by lower financial charges from a reduced level of indebtedness.

Cash flows from operating activities increased by $14.7 million to $50.6 million for the three-month period ended September 30, 2019 from $35.9 million for the same period last year mainly due to an additional $13.7 million generated by the change in operating assets and liabilities mainly from strong collection of trade receivables.

As at September 30, 2019, the Company had $235.9 million of total debt, compared to $339.0 million as at December 31, 2018. As at September 30, 2019, the Company had $82.5 million of net debt excluding lease obligations¹, compared to $182.2 million as at December 31, 2018.

Conference Call & Webcast

Yellow Pages Limited will hold an analyst and media call and simultaneous webcast at 8:30 a.m. (Eastern Time) on November 13, 2019 to discuss third quarter 2019 results. The call may be accessed by dialing 416-340-2216 within the Toronto area, or 1-800-273-9672 outside of Toronto. Please be prepared to join the conference at least 5 minutes prior to the conference start time.

The call will be simultaneously webcast on the Company's website at: https://corporate.yp.ca/en/investors/financial-reports.

The conference call will be archived in the Investors section of the site at: https://corporate.yp.ca/en/investors/financial-events-presentations. 

About Yellow Pages Limited

Yellow Pages Limited (TSX: Y) is a Canadian digital media and marketing company that creates opportunities for buyers and sellers to interact and transact in the local economy. Yellow Pages holds some of Canada's leading local online properties including YP.ca, Canada411.ca and 411.ca. The Company also holds the YP, Canada411 and 411 mobile applications and Yellow Pages print directories. For more information visit www.corporate.yp.ca.

Caution Concerning Forward-Looking Statements

This press release contains forward-looking statements about the objectives, strategies, financial conditions, results of operations and businesses of the Company. These statements are forward-looking as they are based on our current expectations, as at November 12, 2019, about our business and the markets we operate in, and on various estimates and assumptions. Our actual results could materially differ from our expectations if known or unknown risks affect our business, or if our estimates or assumptions turn out to be inaccurate. As a result, there is no assurance that any forward-looking statements will materialize. Risks that could cause our results to differ materially from our current expectations are discussed in section 5 of our November 12, 2019 Management's Discussion and Analysis. We disclaim any intention or obligation to update any forward-looking statements, except as required by law, even if new information becomes available, as a result of future events or for any other reason.

Non-GAAP Financial Measures

Adjusted EBITDA and Adjusted EBITDA margin

In order to provide a better understanding of the results, the Company uses the terms Adjusted EBITDA and Adjusted EBITDA margin. Adjusted EBITDA is equal to Income from operations before depreciation and amortization, and restructuring and other charges (defined herein as Adjusted EBITDA), as shown in Yellow Pages Limited's interim condensed consolidated statements of income. Adjusted EBITDA margin is defined as the percentage of Adjusted EBITDA to revenues.  Adjusted EBITDA and Adjusted EBITDA margin are not performance measures defined under IFRS and are not considered an alternative to income from operations or net earnings in the context of measuring Yellow Pages performance. Adjusted EBITDA and Adjusted EBITDA margin do not have a standardized meaning under IFRS and are therefore not likely to be comparable to similar measures used by other publicly traded companies. Management uses Adjusted EBITDA and Adjusted EBITDA margin to evaluate the performance of its business as it reflects its ongoing profitability. Management believes that certain investors and analysts use Adjusted EBITDA and Adjusted EBITDA margin to measure a company's ability to service debt and to meet other payment obligations or to value companies in the media and marketing solutions industry as well as to evaluate the performance of a business.

Adjusted EBITDA less CAPEX and Adjusted EBITDA less CAPEX margin

The Company also uses Adjusted EBITDA less CAPEX, which is defined as Adjusted EBITDA, as defined above, less CAPEX which we define as additions to intangible assets and additions to property and equipment less lease incentives received as reported in the Investing Activities section of the Company's interim condensed consolidated statements of cash flows. Adjusted EBITDA less CAPEX margin is defined as the percentage of Adjusted EBITDA less CAPEX to revenues. Adjusted EBITDA less CAPEX and Adjusted EBITDA less CAPEX margin are non-GAAP financial measures and do not have any standardized meaning under IFRS. Therefore, are unlikely to be comparable to similar measures presented by other publicly traded companies. We use Adjusted EBITDA less CAPEX and Adjusted EBITDA less CAPEX margin to evaluate the performance of our business as it reflects its ongoing profitability. We believe that certain investors and analysts use Adjusted EBITDA less CAPEX and Adjusted EBITDA less CAPEX margin to evaluate the performance of a business.

The most comparable IFRS financial measure to Adjusted EBITDA less Capex is Income from operations before depreciation and amortization, and restructuring and other charges (defined above as Adjusted EBITDA) as shown in Yellow Pages Limited's interim condensed consolidated statements of income. Refer to page 5 and page 12 of the November 12, 2019 MD&A for a reconciliation of CAPEX and Adjusted EBITDA less CAPEX, respectively.

Net debt excluding lease obligations

Net debt excluding lease obligations is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other publicly traded companies.  Net debt excluding lease obligations is comprised of Senior Secured Notes (including current portion) and Exchangeable debentures less Cash and restricted cash as presented in our interim condensed consolidated statements of financial position. We use net debt as indicator of the Company's ability to cover financial obligations and reduce debt and associated interest charge as it represents the amount of debt excluding lease obligations that is not covered by available cash. We believe that certain investors and analysts use net debt to determine a company's financial leverage.

The most comparable IFRS financial measure is total debt, as presented in the capital disclosures note on page 53 in our annual consolidated financial statements. The table below provides a reconciliation of total debt to net debt excluding lease obligations. 

Net debt excluding lease obligations
(In thousands of Canadian dollars)
As at	September 30, 2019	December 31, 2018
Senior Secured Notes	$79,502	$167,489
Exchangeable debentures	97,925	96,179
Lease obligations	58,499	75,320
Total debt	$235,926	$338,988
Lease obligations	(58,499)	(75,320)
Cash and restricted cash	(94,903)	(81,452)
Net debt excluding lease obligations	$82,524	$182,216

¹Adjusted EBITDA is equal to Income from operations before depreciation and amortization, and restructuring and other charges (defined herein as Adjusted EBITDA), as shown in Yellow Pages Limited's interim condensed consolidated statements of income. Adjusted EBITDA, Adjusted EBITDA margin, CAPEX, Adjusted EBITDA less CAPEX, Adjusted EBITDA less CAPEX margin  and Net debt excluding lease obligations are non-GAAP financial measures and do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other public companies. Refer to the section on Non-GAAP financial measures on page 5 of this document for more details.

¹Net debt excluding lease obligations is a non-GAAP financial measure and does not have any standardized meaning under IFRS. Therefore, it is unlikely to be comparable to similar measures presented by other public companies. Refer to the section on Non-GAAP financial measures on page 5 of this document for more details including reconciliations to the most comparable IFRS financial measure.

SOURCE Yellow Pages Limited

Investors: Franco Sciannamblo, Senior Vice-President and Chief Financial Officer, [email protected]; Media, John Ireland, Senior Vice-President, Organizational Effectiveness, [email protected]

Related Links

https://corporate.yp.ca